Blueprint: Brookfield’s core-plus fundraise, who got PPP loans, UBS’s Azelby on covid-19

Brookfield's core-plus expansion; real estate's PPP loan recipients; UBS's Joe Azelby on covid-19; and more in today's briefing, exclusively for our valued subscribers.

He said it

“Maybe the buildings are not going to be as dense as they were before for the community side of the business, but the demand for high-quality workspaces that are sanitized, that [make] people feel comfortable will be at an all-time high.”

WeWork executive chairman Marcelo Claure describes the future of co-working in the coronavirus era to the Financial Times

What’s new

Opening the spigot

Thirty days can sometimes make a big difference. Brookfield Asset Management is expanding its core-plus real estate fund series, which it launched in the US in 2016, into Europe – look out for our story this week on the firm’s initial close for the new vehicle. With much of the region still emerging from coronavirus lockdowns, the Toronto-based alternative asset manager has only deployed about 3 percent of the capital to date in a single transaction. However, Zach Vaughan (pictured), Brookfield’s head of real estate in Europe, tells us the firm has seen a lot more dealflow in the past month as the region reopens for business. In fact, Brookfield currently is in active review of €1.5 billion of transactions for the new fund.

Who’s down with PPP

The US Paycheck Protection Program has doled out more than $500 billion in loans to date to help small businesses weather the covid-19 pandemic. Of that amount, the real estate, rental and leasing sector is said to have received some $15.6 billion. Among the list from the Small Business Administration of PPP recipients and their approximate loan totals, we spotted the following groups, a mix of investment managers, placement agents and industry associations active in private real estate. One recipient told us declining fund allocations during the crisis has put their firm under pressure. However, the recipient went on to say they are still actively hiring at the same time.

Greener pastures

Covid-19 has given some investors jitters about real estate. In a profile on sister title Agri Investor, Joe Azelby, UBS’s head of real estate and private markets, says widespread distress and prolonged uncertainty around retail and hospitality could drive capital to other alternatives: “I just think people are going to look for other areas and places to store value and perhaps we’ll see the high-net-worth space engage in the farmland discussion,” he says.

Data snapshot

Going global

A Goodwin Procter survey of more than 1,200 fund investors found that most will now favor multi-country investment strategies because of covid-19.

Trending topics

Gimme shelter

Residential real estate is proving its resilience in the face of covid-19. Early indications are that sub-sectors such as multifamily, senior housing, student housing and co-living have hit a few bumps but stayed on the road. Our special report on the residential space, published this week, yielded the following findings:

  • Look locally: Not all US housing markets are created equal: while 29 states have housing deficits, 21 have oversupply. Investors need to zoom in to see the local picture if they are going to navigate the challenges and opportunities of the current climate.
  • Go pro: Covid-19 has called for housing providers to enhance their operations and professionalism in order to respond to residents’ new safety and wellbeing requirements. Technology has also played an important role in the sector in helping to implement these changes.
  • Stay in schools: Specifically, stay invested in housing for the top-tier universities, which are best positioned to survive a financial disruption. Fears that students will shun college-adjacent apartments in favor of staying home and attending classes virtually now look overblown.
  • Workforce watch: The future of US workforce housing depends on the federal government. If Americans continue to receive coronavirus stimulus checks until the newly reopened economy is back in full swing, then the sector has a bright outlook; if not, a deluge of missed rent payments could be imminent.

Data driven

Digital real estate has emerged as private real estate’s alternative sector of choice during covid-19, and demand continues to pick up steam. Colony Capital has remained one of the most active players in the space, leading a group of investors in a $1.2 billion investment into Vantage Data Centers last week. It then got New York-based investment firm Wafra Inc in on the action this week with the purchase of a $400 million stake in the Digital Colony platform.

Investor watch

On or off again?

The Los Angeles County Employees’ Retirement Association is officially on the market for a new real estate investment consultant. The $60 billion pension issued a request for proposals last week, as the five-year contract with its current consultant, Cleveland-based Townsend Group expires in June 2021. LACERA and Townsend have had a long on-again, off-again relationship: the consultant was first hired in 1992, then reselected in 2004 and again in 2015. LACERA plans to begin evaluating proposals this fall and reach a decision by December or January, so we’ll know by early next year if the two are still on or have split once again.

This week’s LP meetings

Tuesday, July 14

Wednesday, July 15

Thursday, July 16

Today’s letter was prepared by Kyle Campbell with Evelyn Lee, Arshiya Khullar, James Linacre and Eugenia Jimenez contributing.